Official Cash Rate Cut To 4.75 Per Cent

The Reserve Bank today cut the Official Cash Rate by half a
per cent from 5.25 per cent to 4.75 per cent.

Reserve Bank
Governor Don Brash commented "A good deal has changed since
our last assessment in August. Even before the tragic events
of 11 September, the world economy was slowing quite
rapidly. The events of 11 September exacerbated that
slowdown by dealing a blow to business and consumer
confidence around the world, and led us to cut interest
rates by half a per cent on 19 September.

"The slowdown in
the international economy is already affecting the New
Zealand economy and will continue to do so. Export prices
are now falling across a wide front, while nervousness about
air travel is having an adverse impact on the growth of
tourism. Business confidence has declined markedly, and we
are expecting investment spending to slow. The economy has
already slowed quite sharply and is likely to continue
growing rather slowly in the immediate future. This will
exert downwards pressure on inflation.

"New Zealand enters
this period of slow international growth in a relatively
strong position with demand pressures on productive
resources still evident in some areas. However, the slowdown
in growth expected over the coming year should see these
pressures abate, with inflation expected to fall back to
around the middle of the target band.

"Monetary policy is
now set to accommodate quite a bit of additional weakening
in the global environment. That reflects our judgement about
the risks that lie ahead. But the uncertainty in the present
situation is very considerable, and it is not inconceivable
that the current slowdown will prove to be short-lived.

"We will be monitoring all of the information as it
becomes available, and will be constantly vigilant as to the
outlook for inflation," Dr Brash concluded.

The Reserve
Bank is next scheduled to review the Official Cash Rate on
23 January 2002.

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